Annex 2 Statistical definitions for the Foreign Exchange market

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1 DNR AFS Annex 2 Statistical definitions for the Foreign Exchange market Sources: Sveriges Riksbank, Bank for International Settlements (BIS), European Commission and Nasdaq OMX. Selma FX (Foreign Exchange) reporting refers to daily turnover statistics for different currency pairs and interest rate derivatives in the Swedish krona (SEK) market. The transactions should be broken down into transaction types, contract types and counterparty types as listed below. In this way, Sveriges Riksbank (the central bank of Sweden) can obtain a comprehensive picture of activity in the foreign-exchange market in SEK and is able to assess the market shares of each individual reporter (see section 4 for the definition of reporters). Institution-specific information is only provided to the actual institution. However, the aggregate information, the sum of all institutions, will be public information. Note that all amounts are to be expressed in SEK million without decimals. A reporter may report the final rate or the average rate as long as the reported exchange rate is consistent. CONTENTS 1. Instruments (Asset Types) Currency pairs Derivatives Transaction Types For currency pairs For derivatives For FRA and RIBA futures For Swap STINA SEK/SEK Contract Types For currency pairs Spot and (outright) forward FX-Swaps (Currency) Option For derivatives Counterparty Types Interdealer Customer

2 1. Instruments (Asset Types 1 ) 1.1 Currency pairs SEK/EUR: Foreign exchange transactions between Swedish krona (SEK) and euro (EUR). SEK/USD: Foreign exchange transactions between SEK and US dollar (USD). SEK/Others: Foreign exchange transactions between SEK and other currencies except EUR and USD. Picture of a FX report 1 Instruments are named asset types for technical purposes only. 2

3 1.2 Derivatives This category is restricted to those deals where all the legs are exposed to only one currency s (only SEK) interest rate. Thus it excludes contracts involving the exchange of one or more foreign currencies (e.g. cross-currency swaps) and other contracts whose predominant risk characteristic is foreign exchange risk, which are to be reported as foreign exchange contracts. FRA: Short-term forward rate agreements on deposits in SEK. All FRAs (Forward Rate Agreements) are to be reported regardless of maturity and construction. Standardised and unstandardised, cleared and uncleared IMM/FRAs and FRAs should be reported with the notional principle amount. Picture of the FRA matrix in the FX report 3

4 Swap STINA SEK/SEK: Short-term single-currency interest-rate swaps 2, denominated in SEK, with a maturity up to a year, generally called STINA (Stockholm Tomnext Interbank Average) are to be reported with the notional principle amount. Picture of the swap STINA matrix in the FX report 2 Agreement to exchange periodic payments related to interest rates on a single currency (only SEK); can be fixed for floating, or floating for floating based on different indices. 4

5 RIBA future: RIBA future is a cash-settled futures contract based on the Riksbank s repo rate. The contract base is a fictitious loan with a maturity corresponding to the period between two IMM dates and which is finally cleared against the average repo rate for the period concerned. Picture of the RIBA future matrix in the FX report RIBA futures are to be reported with the notional principle amount. 5

6 2. Transaction Types 2.1 For currency pairs Turnover in the currency pairs SEK/EUR, SEK/USD and SEK/OTH is to be split into purchases and sales according to the following: Purchased currencies (Sold SEK): Currencies purchased for Swedish kronor. Refers to the counterparty the reporter has purchased from. Sold currencies (Purchased SEK): Currencies sold for Swedish kronor. Refers to the counterparty the reporter has sold to. 2.2 For derivatives For FRA and RIBA futures Turnover in FRAs and RIBA futures is to be split into purchases and sales according to the following: Purchased (SEK mio): Refers to the counterparty the reporter has purchased from. Sold (SEK mio): Refers to the counterparty the reporter has sold to For Swap STINA SEK/SEK Turnover in Swap STINA SEK/SEK is to be split into pay or receive according to the following: Pay: Refers to the counterparty the reporter is paying fixed rate to. Receive: Refers to the counterparty the reporter is receiving fixed rate from. 6

7 3. Contract Types 3.1 For currency pairs Turnover in the currency pairs SEK/EUR, SEK/USD and SEK/OTH is to be broken down into the following contract types: Spot and (outright) forward Spot: Spot transactions are single outright transaction involving the exchange of two currencies at a rate agreed on the date of the contract for value or delivery (cash settlement) within two business days. (Outright) Forward: Transaction involving the exchange of two currencies at a rate agreed on the date of the contract for value or delivery (cash settlement) at some time in the future (more than two business days later). Please note that the spot legs of swaps should not be included among spot transactions but are to be reported as swap transactions even when they are for settlement within two days (i.e. spot transactions should exclude tomorrow/next day transactions) FX-Swaps Swaps are transactions which involve the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract (the short leg), and a reverse exchange of the same two currencies at a date further in the future at a rate (generally different from the rate applied to the short leg) agreed at the time of the contract (the long leg). This category also includes forward foreign exchange agreement transactions (FXA), nondeliverable forwards and other forward contracts for differences, e.g. uneven swaps. Please note that both legs of FX swap transactions are always required in the daily reporting. The Riksbank requires below that FX swaps are to be reported separately as Short- and FXswaps. They are distinguished by the maturity of the long leg in the swap. It is accordingly not a matter of categorising the short leg in a foreign exchange swap as a Short Swap and the long leg in the same swap transaction as an FX Swap. Consequently, reporting both legs of a swap transaction is nor a matter of categorising the short leg as a spot transaction and the long leg as a forward transaction. Reporting the two legs of a swap transaction actually implies: 1. either a combination of purchased from a counterparty and sold to another counterparty or 2. as a combination of sold to and purchased from in the opposite case Short Swap: FX-swap transactions where the long leg is at longest the spot date (o/n and t/n swap). FX Swap: FX-swap transactions where the long leg is from t+3 (trade date + 3 days) and longer. Both spot/forward and forward/forward swaps should be included. 7

8 Example: A FX Swap transaction where a reporter purchases 200 million SEK/EUR from a Swedish Customer to sell back 199 million in the end of the transaction. The transaction should be reported by the reporter as: Asset type: SEK/EUR Transaction type: Please note that amount is to be reported both in purchased 200 and sold 199 Contract Type: FX Swap, Counterparty type: Swedish customer, Picture of the above mentioned example of reporting an FX-swap (Currency) Option The reporting requires an option contract that gives the right to buy or sell a currency with another currency at a specified exchange rate during a specified period. This category also includes exotic foreign exchange options such as average rate options and barrier options. Option: Currency options, such as plain vanilla and exotic options. OTC option contracts include all option contracts not traded on an organised exchange. Swaptions, i.e. options to enter into a swap contract, and contracts known as caps, floors, collars, corridors 8

9 and other plain vanilla contracts should be reported as options. Options such as call feature embedded in loans, securities and other on balance sheet assets do not fall within the reporting requirements and are therefore not to be reported unless they are a derivative instrument that must be treated separately under FAS 133 or IOAS 39. These accounting standards required the bifurcation of derivatives that are not clearly and closely related to the host contract. Commitments to lend are not considered options for the purpose of this reporting. Purchased option : Data are requested on the nominal amount of a currency transaction for which the reporting bank has, for a fee or premium, acquired the right to either purchase or sell under OTC options contracts. Also to be reported are data for purchased caps, floors and swaptions and for the purchased portion only of collars and corridors. Sold option (write option): Data are requested on the nominal amount of a currency transaction for which the reporting bank has, for compensation (such as a fee or premium), obligated itself to either purchase or sell under OTC option contracts. Also to be reported are data for written caps, floors and swaptions and for the written portion only of collars and corridors. 9

10 3.2 For derivatives Turnover in FRA, RIBA future and Swap STINA SEK/SEK is not to be broken down into contract types. - : Not applicable. Picture of reporting derivatives, contract type not applicable 10

11 4. Counterparty Types The different counterparty types are broken down into two main types: interdealer and customer Interdealer Swedish Reporters: The Riksbank s Counterparties in Foreign Exchange Transactions defined as Swedish Reporters. Please see for an updated list of Swedish Reporters. This information can also be retrieved in the SELMA system s function Active Institutions. Non-Swedish Reporter: The Riksbank s Counterparties in Foreign Exchange Transactions defined as Non-Swedish Reporter. Please see for an updated list of Non-Swedish Reporters. This information can also be retrieved in the SELMA system s function Active Institutions. Other Bank: Other banks, market makers or investment banks, except Swedish or Non-Swedish Reporters. Note that it is unusual for Swedish banks not to be a counterparty of the Riksbank. Some examples are, however, Skandiabanken and Ikanobanken Customer Swedish Customer: Customers located in Sweden. 3 This category also serves as other items for counterparties in Sweden, i.e. all counterparties who cannot be categorised as Swedish reporters, other banks or the Riksbank. The reporters are to report transactions with the ALM department 4 as customer transactions. Other internal trades are not to be reported at all. 5 Non-Swedish Customer: Customers located outside Sweden 6. This category also serves as other items for counterparties outside Sweden who cannot be categorised as Swedish or non-swedish reporter, Swedish customer, other banks or the Riksbank. 3 The country of legal incorporation determines a customer s location. For branches, the customer s location is determined by the country of incorporation of its head office 4 ALM department means the department that manages the balance sheet of the bank, i.e., manages the duration and refinancing risks, and the bank s securities investment portfolio, according to the Economic and Financial Committee on EU Government Bonds and Bills Market within the European Commission. 5 Other internal trades include trades between the government bond, back books, swap, option and credit trading units of the reporter. 6 Please see footnote 5. 11

12 The reporters are to report transactions with the ALM department 7 as customer transactions. Other internal trades are not to be reported at all. 8 Sveriges Riksbank: The counterparty in the transaction is the Swedish central bank, the Riksbank. 7 Please see footnote 6. 8 Please see footnote 7. 12

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